In practice, equipment fraud covers dishonest conduct linked to buying, leasing, repairing, installing or servicing machinery and production assets.
Many scenarios map onto the Fraud Act 2006, which provides a general offence of fraud committed by false representation (section 2), failing to disclose information (section 3) or abuse of position (section 4).
For large organisations, the Economic Crime and Corporate Transparency Act 2023 (ECCTA) adds a corporate exposure. Section 199 creates an offence of ‘failure to prevent fraud’ where an associated person commits a specified fraud offence intending to benefit the organisation (or, in some cases, its clients) and the organisation did not have reasonable prevention procedures.
Why manufacturers are exposed
Downtime pressure drives exceptions.
Fraud risk rises when urgent work bypasses standard documentation, approvals, or supplier verification.
Procurement fraud is also widely recognised as a disruptive economic crime in broader reporting, reinforcing that this risk is not theoretical.
Types of equipment fraud
Invoice fraud – false, inflated or duplicate invoices
Typical patterns include charging for work not done, inflating labour hours, over‑billing for parts, billing off‑contract rates, or submitting duplicate invoices.
Red flags include missing support, vague descriptions, and mismatches between purchase orders, receipt records and invoices. Other warning signs can include invoices with no supporting documents or purchase order, invoices dated on weekends or holidays, and an unusual use of round‑number amounts.
Depending on the facts, this can engage fraud by false representation under the Fraud Act 2006. The CPS prosecution guidance summarises the Fraud Act offences and key elements (including dishonesty and intent to make a gain or cause loss or risk of loss).
Payment diversion – supplier bank detail change scams
A fraudster impersonates a known supplier and asks for bank details to be ‘updated’, diverting a genuine payment. In these circumstances verification should always be carried out using trusted contact details already held on file, rather than details in the suspicious message.
There are common warning signs to look out for, including unusual spelling or grammar, unexpected telephone numbers, and even slight variations in email addresses. Strengthening email security is vital, including multi‑factor authentication.
Conflicts of interest and kickbacks – distorted supplier decisions
Where personal benefit influences supplier choice, pricing or acceptance of poor quality, risk can shift from commercial to criminal.
The Bribery Act 2010 includes Section 7 (failure to prevent bribery) with a defence if ‘adequate procedures’ are in place. Ministry of Justice guidance sets out six principles for those procedures, including proportionality, top‑level commitment, risk assessment, due diligence, communication (training) and monitoring and review.
In the case of ‘R v Skansen Interiors Limited [2018]’, a jury rejected the company’s adequate procedures defence and decided that the controls it had in place were insufficient. This case highlighted the importance of record-keeping and maintaining up to date policies, the importance of training and information, of clear reporting lines and responsibility and the high threshold required to be met to successfully run the adequate procedures defence.
Case study: Intercepted invoice scam
A Financial Ombudsman Service case study shows how convincing supplier impersonation can be. A company director received an invoice via email from a regular supplier, then minutes later received a second email, apparently from the supplier, instructing him to pay a different bank account because the usual account was being ‘audited‘.
He paid £12,000 to the new account, the supplier later chased payment, and it emerged that a fraudster had accessed the supplier’s email account and intercepted the email chain.
The bank refused to refund, arguing the director had not done enough checks and had ignored a scam warning. The Ombudsman disagreed and required a full refund. It noted that differences between genuine and fraudulent correspondence were not necessarily obvious without careful inspection, and the bank’s warning did not do enough to explain how this type of scam works or what steps to take.
Manufacturers should treat any request to change payment details as a trigger for independent verification. The Ombudsman case study recommends confirming account details in person or on a trusted phone number, especially if they have changed.
Legal test for dishonesty
Many fraud offences require dishonesty. In ‘Ivey v Genting Casinos [2017]’, the Supreme Court described an approach that first establishes the individual’s actual knowledge or belief as to the facts and then assesses whether the conduct is dishonest by the standards of ordinary decent people.
Operationally, this underlines why ‘I thought it was fine’ is not a safe control when processes or documentation are being manipulated.
Prevention procedures
The Home Office ECCTA guidance frames ‘reasonable fraud prevention procedures’ around six principles: top‑level commitment, risk assessment, proportionate procedures, due diligence, communication (including training), and monitoring and review.
It also notes that while the offence applies to large organisations, the principles represent good practice and may help smaller organisations.
Closing thought
Equipment fraud is usually not one dramatic event; it can emanate from small process failures repeated under time pressure. Focusing controls on invoice integrity, bank detail governance and conflicted decision‑making reduces both financial loss and operational disruption and will also help you to align yourselves with the UK’s statutory prevention frameworks.
About the author
Phillippa O’Neill, is partner in the Dispute Resolution team at lae firm, Birketts LLP.
